Justia Insurance Law Opinion Summaries

A tornado struck Tennessee, damaging two properties owned by a church that held property insurance with an insurer. The church filed a claim, and the insurer made a payment, but the church alleged that the insurer improperly calculated the amount by subtracting depreciation for non-material costs (such as labor) from the "actual cash value" (ACV) payment, leading to a lower payout. The insurance policy did not specify whether labor should be depreciated. The church then brought a putative class action, asserting similar claims under the laws of ten states, seeking class certification for policyholders who received reduced ACV payments because of the insurer’s practice.The United States District Court for the Middle District of Tennessee addressed several motions. It rejected the insurer’s argument that the church lacked Article III standing to assert claims under other states' laws, and denied the insurer’s motion for judgment on the pleadings as to Texas law. When considering class certification, the district court found the plaintiff satisfied Rule 23(a)’s requirements but limited class certification to four states (Arizona, California, Illinois, and Tennessee), citing unsettled law in the remaining six states. The court reasoned that the uncertain nature of laws in Kentucky, Ohio, Missouri, Mississippi, Texas, and Vermont would make a ten-state class action unwieldy, and thus declined to certify a class for those states.On appeal, the United States Court of Appeals for the Sixth Circuit reviewed the district court’s decisions. It held that the plaintiff had Article III standing to represent the class because the alleged injuries were substantially similar across the proposed class members. The appellate court found that the district court abused its discretion by not conducting an Erie analysis for five of the six excluded states and vacated the class-certification order in part, remanding for further proceedings. However, it affirmed the denial of class certification for Vermont due to insufficient authority on Vermont law. View "Generation Changers Church v. Church Mutual Ins. Co." on Justia Law

Mr. Scobee suffered significant injuries in a motorcycle accident involving Mr. Norris, who was insured by USAA. The Scobees, after obtaining a $7 million jury verdict against the Norrises in Missouri state court, claimed that USAA violated Kentucky’s Unfair Settlement Practices Act (KUCSPA) and committed common-law bad faith by failing to promptly settle their claim and by not paying the policy limit. The Scobees had initially made a settlement demand to USAA, which USAA declined, requesting more information. The Scobees did not respond, instead proceeding with litigation, which ultimately resulted in the jury verdict. After judgment, USAA offered to pay its $100,000 policy limit but the Scobees did not respond to this offer. USAA subsequently deposited the policy limit plus interest into the court registry during separate declaratory judgment proceedings.The case began in Kentucky state court but was removed to the United States District Court for the Eastern District of Missouri. That court dismissed the common-law bad faith claim, granted summary judgment for USAA on the KUCSPA claim, limited the Scobees’ expert testimony, and denied the Scobees’ motions for summary judgment and to exclude USAA’s expert testimony.The United States Court of Appeals for the Eighth Circuit reviewed the case. It held that the district court did not abuse its discretion in limiting the Scobees’ expert’s testimony, especially regarding legal conclusions and interpretations of Kentucky law. The appellate court also affirmed summary judgment for USAA, concluding there was no genuine dispute of material fact and that USAA’s conduct did not rise to the level of bad faith or “outrageous” conduct required under KUCSPA. The court further ruled that USAA was not obligated to pay until liability was established by the jury and found no improper motive in USAA’s handling or timing of payment. The judgment of the district court was affirmed in all respects. View "Scobee v. USAA Casualty Insurance Company" on Justia Law

Chang Goo Yoon, a licensed physical therapist operating clinics in Massachusetts, engaged in a scheme over four years to submit more than one million dollars in fraudulent claims to private health insurers, including Blue Cross Blue Shield and Aetna, for services he did not actually provide. He fabricated treatment notes, sometimes under another provider's name, and submitted false personal injury claims to his own car insurer, MAPFRE. Yoon manipulated patient addresses to ensure reimbursement checks were sent directly to him, avoiding detection by patients. His fraudulent conduct was eventually uncovered, and a jury convicted him on two counts of health care fraud, with Count One involving Blue Cross and Aetna, and Count Two concerning MAPFRE.The United States District Court for the District of Massachusetts presided over the trial. Before trial, Yoon moved to exclude evidence related to insurance company investigations into his billing, including a 2015 Blue Cross investigation and a 2007 Colorado licensing investigation. The district court limited the evidence to Yoon’s knowledge of the investigations, excluding their outcomes. The court also redacted key documents and provided limiting instructions to the jury. At trial, witnesses testified about insurance procedures and Yoon’s billing practices. Yoon challenged the admissibility of this evidence, as well as testimony from insurance investigators, arguing it was unduly prejudicial and improperly admitted.The United States Court of Appeals for the First Circuit reviewed Yoon’s appeal. The court affirmed the district court’s evidentiary rulings, holding that evidence of Yoon’s knowledge of prior investigations was highly probative of his specific intent and not unduly prejudicial given the safeguards imposed. The court also affirmed the application of two sentencing enhancements: one for intended loss based on the total amount billed, and another for abuse of a position of trust, finding both were supported by the record and correctly applied. Yoon’s conviction and sentence were affirmed. View "United States v. Yoon" on Justia Law

The case concerns a life insurance policy that was issued by an insurer to Ewanda Ferguson. After the policy had lapsed for nonpayment, Ewanda applied for reinstatement by submitting an application in which she falsely denied having her driver’s license suspended or being convicted of DUI/DWI in the prior ten years. In reality, Ewanda had two operating-while-impaired convictions and a license revocation within that period. She died in an automobile accident a few months later. The insurer reinstated the policy posthumously and the beneficiary, Elizabeth Ferguson, submitted a claim for the death benefit.Following Ewanda’s death and the submission of the claim, the insurer discovered the misrepresentations in the reinstatement application. Because Ewanda died within the two-year contestability period, the insurer reviewed her application, determined that it would not have reinstated the policy had it known of her true driving history, and rescinded the policy. The insurer then refused to pay the death benefit. Elizabeth Ferguson filed suit in Michigan state court, alleging breach of contract. The insurer removed the case to the United States District Court for the Eastern District of Michigan and counterclaimed to confirm the propriety of rescission. The district court granted summary judgment to the insurer, holding that rescission was proper without balancing the equities, because Ferguson was not an “innocent third party” under Michigan law.On appeal, the United States Court of Appeals for the Sixth Circuit held that, under Michigan law, a life insurance beneficiary who is a third-party beneficiary stands in the shoes of the insured and has no greater rights than the insured would have had. Therefore, the insurer was entitled to rescind the policy based on material misrepresentations made by Ewanda, and the district court was not required to balance the equities before ordering rescission. The Sixth Circuit affirmed the district court’s judgment. View "Ferguson v. MetLife Investors USA Insurance Co." on Justia Law

A steel subcontractor was hired to perform work for a university construction project and entered into a subcontract with the general contractor. The general contractor began defaulting on payments, prompting the subcontractor to notify the surety insurance company, which had issued a payment bond guaranteeing payment for labor, materials, and equipment. The surety made partial payment but disputed the remaining amount. The subcontractor then demanded arbitration against the contractor, with the surety notified and invited to participate. The contractor filed for bankruptcy and did not defend in arbitration, nor did the surety participate. The arbitrator awarded the subcontractor damages, including attorneys’ fees and interest, and the award was confirmed in court. The subcontractor sought to enforce the arbitration award against the surety, including attorneys’ fees and prejudgment interest, and also brought a bad faith claim under Pennsylvania’s insurance statute.The Centre County Court of Common Pleas initially excluded evidence of the arbitration award against the surety at trial and ruled the surety was not liable for attorneys’ fees or bad faith damages. A jury found for the subcontractor on the underlying debt, and the court awarded prejudgment interest at the statutory rate. Both parties appealed. The Superior Court held the arbitration award was binding and conclusive against the surety, who had notice and opportunity to participate, and affirmed liability for attorneys’ fees related to pursuing the contractor in arbitration. The court rejected the bad faith claim, holding the statute did not apply to surety bonds, and confirmed the statutory interest rate.On appeal, the Supreme Court of Pennsylvania affirmed in all respects. It held that Pennsylvania’s insurance bad faith statute does not apply to surety bonds, based on statutory language. The court also held that the surety is bound by the arbitration award against its principal, and is liable for attorneys’ fees incurred in arbitration and prejudgment interest at the statutory rate. View "Eastern Steel v. Int Fidelity Ins. Co." on Justia Law

A life insurance policy was taken out on Norman Frank, then later sold to an investor unconnected to him. After Frank’s death in 2018, the insurer paid over $5 million in death benefits to the policy’s beneficiary. In 2023, Frank’s estate filed suit in the Superior Court of the State of Delaware to recover those proceeds, alleging that the policy was procured as part of a “stranger originated life insurance” (STOLI) scheme, in violation of Delaware’s statutory prohibition on life insurance contracts lacking an insurable interest.The defendants removed the case to the United States District Court for the District of Delaware. That court dismissed one defendant, Wells Fargo, leaving GWG DLP Master Trust as the sole defendant. The Trust moved to dismiss, arguing the estate’s claim under 18 Del. C. § 2704(b) was barred by Delaware’s general three-year statute of limitations for actions “based on a statute” (10 Del. C. § 8106(a)), since the death benefits were paid in 2019 and the suit was not filed until 2023. The estate argued that either no limitations period applied due to public policy, or that the claim accrued later when the executor was appointed. The District Court certified the question of what limitations period, if any, applies to the Delaware Supreme Court.The Supreme Court of Delaware held that claims under 18 Del. C. § 2704(b) are subject to the three-year statute of limitations in 10 Del. C. § 8106(a). The court reasoned that § 2704(b) created a new statutory right for estates to recover death benefits paid on policies lacking an insurable interest, which falls within the scope of actions “based on a statute.” The court rejected the estate’s argument that strong public policy against STOLI contracts precluded a limitations defense, and clarified that the limitations period may be subject to tolling doctrines in cases of concealment or fraud. View "GWG DLP Master Trust Dated 03/01/06 v. Estate of Frank" on Justia Law

Jacqueline Leone was insured under a $6,000,000 life insurance policy issued by Ameritas’s predecessor. The policy was obtained through a program orchestrated by Peachtree Settlement Funding, which partnered with Barclays Bank to provide premium financing to life insurance trusts. The program incentivized the creation of trusts and policies for investors through nonrecourse loans, with little financial risk to the insured. Leone’s irrevocable trust, created in Georgia, was the policy owner and beneficiary, with her husband designated as the trust beneficiary. After two years, Peachtree acquired the policy rights following a loan default, and eventually Wilmington Trust became the record owner. When Leone died, Wilmington Trust sought payment of the death benefit, but Ameritas refused, arguing the policy was a prohibited “stranger-originated life insurance” (STOLI) contract, violating Georgia’s insurable interest laws.The United States District Court for the Northern District of Georgia, before deciding cross-motions for summary judgment, certified three questions to the Supreme Court of Georgia regarding the circumstances under which a life insurance policy is void as an illegal wager on human life. Specifically, the district court sought clarification about when a third party is considered to have “procured or caused to be procured” a life insurance policy under Georgia law.The Supreme Court of Georgia held that a third party may be found to have “procured or caused to be procured” a life insurance policy on the life of another—even if the insured participated—if the third party effectively obtained or acquired the policy. The court directed that the totality of the circumstances must be considered in making this determination, including factors such as who paid premiums, who controlled the process, and the purpose of the policy. The court answered the certified questions accordingly, providing guidance for interpreting Georgia’s insurable interest statute. View "WILMINGTON TRUST, NATIONAL ASSOCIATION v. AMERITAS LIFE INSURANCE CORP." on Justia Law

A software company that provides donor management and data hosting services for nonprofit and educational entities experienced a significant ransomware attack. Hackers accessed and exfiltrated sensitive client data over several months, leading to widespread concern among the company’s clients about the adequacy of the company’s response. Rather than conducting a thorough investigation and remediation itself, the company provided clients with a toolkit for self-investigation and remediation. Dissatisfied, the clients undertook their own investigations and incurred expenses for legal counsel, notifications, credit monitoring, and other remedial measures. Insurance carriers that had issued policies covering such cyber incidents paid out claims for these losses, then sought to recover from the software company as subrogees and assignees of their insured clients.The Superior Court of the State of Delaware initially dismissed the insurers’ complaints for failing to state a claim and, after amended complaints were filed, dismissed them with prejudice. The Superior Court reasoned that the insurers failed to provide sufficient factual support for each insured’s claim by pleading in the aggregate, and further found that proximate cause had not been adequately alleged, as the complaints did not link the damages to any specific contractual obligation.On appeal, the Supreme Court of the State of Delaware reviewed the Superior Court’s decision de novo. The Supreme Court held that the insurers, as subrogees/assignees, adequately pled a breach of contract claim under New York law, which governed the agreements, and that Delaware’s notice pleading standard was satisfied. The Court found that the amended complaints sufficiently alleged the existence of contracts, performance by the insureds, breach by the company, and resulting damages, and that proximate cause was properly pled. The Supreme Court reversed the Superior Court’s dismissal and remanded for further proceedings. View "Travelers Casualty and Surety Company of America v. Blackbaud, Inc." on Justia Law

In 2019, a tornado struck the home of the insured homeowners, causing significant property damage. The homeowners held a policy issued by their insurer, which included an $87,156 deductible for losses caused by “Windstorm or Hail.” The policy did not define “windstorm.” The insurer applied this deductible to the homeowners’ claim, asserting that the tornado damage was subject to the windstorm deductible. The homeowners disputed this, arguing that a tornado is not a “windstorm” as commonly understood and that the deductible should not apply.The dispute led to litigation in the 68th District Court of Dallas County, where both parties filed motions for summary judgment based on the interpretation of the term “windstorm.” The trial court ruled for the insurer, finding that a tornado qualifies as a windstorm and applying the deductible. On appeal, the Court of Appeals for the Fifth District of Texas reversed, holding that “windstorm” was ambiguous in the policy context and could reasonably be read to exclude tornadoes. The appellate court rendered judgment for the homeowners, concluding that the ambiguity must be resolved in their favor.The Supreme Court of Texas reviewed the case and reversed the appellate court’s decision. The Supreme Court held that, when undefined in a homeowners insurance policy, the ordinary meaning of “windstorm” unambiguously includes a tornado. The Court examined dictionary definitions, statutory usage, and relevant case law, finding no persuasive authority that would exclude tornadoes from the scope of “windstorm.” Accordingly, the Supreme Court reinstated the trial court’s summary judgment in favor of the insurer, holding that the homeowners’ claim was subject to the policy’s windstorm deductible. View "PRIVILEGE UNDERWRITERS RECIPROCAL EXCHANGE v. MANKOFF" on Justia Law

Shirley and Ronald Cooper experienced a sewage backup in their newly built Mississippi home in 2022, resulting in significant damage. Their residence used a grinder pump system to handle household wastewater, which then pumped the waste to a city utility line. At the time of the incident, they held a homeowners policy with State Farm Fire and Casualty Insurance Company, which included a standard exclusion for damage caused by water or sewage from outside the premises, but they had also purchased a limited endorsement for backup of sewer or drain losses. After the incident, State Farm paid the Coopers under the dollar-capped endorsement. The Coopers claimed that State Farm’s adjuster, Dilley, represented that the primary policy would also apply, leading them to expend additional resources on remediation.After the Coopers sued State Farm for breach of contract, detrimental reliance, and other related claims, State Farm removed the case to the United States District Court for the Southern District of Mississippi. The Coopers voluntarily dismissed their claims against the adjuster. The district court granted summary judgment for State Farm, finding no genuine dispute that the source of the sewage was off-premises and concluding that the policy’s exclusion unambiguously barred coverage. The court also rejected the detrimental reliance claim, holding that any reliance on the adjuster’s statements was unreasonable given the clear policy language.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the summary judgment decision de novo. The Fifth Circuit affirmed the district court’s judgment, holding that Mississippi law imputes constructive knowledge of policy terms to insureds and that reliance on an agent’s contradictory statements is unreasonable when the policy language is clear. The court also found no genuine factual dispute regarding the off-premises source of the sewage, and summary judgment for State Farm was proper. View "Cooper v. State Farm" on Justia Law